High living costs force seniors to rethink retiring and their estate

A new report from Australian Seniors, titled Inheritance & Retirement Report 2024, reveals that nearly a third of Aussies over 50 have decided to postpone their retirement due to the rising cost of living, facing the compounding pressures of funding their own retirement while also having enough left over to leave to their kids.This balancing act has led to some interesting developments in the way families are distributing inheritances. The report found that a whopping 69% of older Austrlaians have already given or plan to give their inheritance to their children or grandchildren before they themselves pass away. 

This strategy of ‘lifetime gifting’, in which home and other assets are gifted to children while the parents are still alive, is a way for parents to help their children cope with the crises around cost of living and housing affordability.

“Not only is this a way to provide immediate relief from cost of living pressures, but it also allows families to enjoy the giving and receiving together, rather than at the time of passing”, said the report’s author, Safewill founder and chief executive, Adam Lubofsky.Of course, it’s easy to see how this could put strain on the parents’ own retirement plans. Over 60% of seniors worry about outliving their retirement funds, and more than half feel the pressure of maintaining their lifestyle in a time of increasing financial uncertainty.

The retirement age debate

It’s worth noting that many Aussies are choosing to work longer, but that choice might not be so optional in the future. Across the world, retirement ages are being pushed back—sometimes with plenty of backlash. France saw protests and riots over plans to lift the pension age to 64. 

In the US, the full retirement age for Social Security is 67 for the youngest cohort, and there’s ongoing discussion about potentially raising it to 70. This almost exactly mirrors what’s going on here at home, where the pension age is already at 67, and there’s talk it could go to 70 in the not-so-distant future. 

For superannuation, the preservation age is now set at 60 as of 2024, but even then, you can’t touch it unless you’ve fully retired and have no plans to return to work. But with the rising cost of living, soaring healthcare expenses, and a phasing out of the Age Pension, even a well-funded super might not stretch far enough.

Takeaway: making the most of your super

Given all the current financial pressures, it’s important to make sure your super is working for you—and it doesn’t have to be complicated.

We get that extra cash can be hard to come by these days, but if you end up with some at the end of the month or come into a bonus, consider adding it to your super as a concessional contribution. While this will be after-tax money, you can claim a tax deduction, which means it’ll receive the same tax treatment as your employer’s contributions as long as all contributions don’t exceed $30,000. 

This can help reduce your tax bill and help your balance grow over time. Just make sure it won’t add more pressure to your ability to make ends meet in the here and now.

If you’ve got kids saving for a home, consider the ‘lifetime gifting’ we discussed before. You don’t have to sign your home over to them just yet, but a little extra cash to supplement their income could help them add a bit more to their super under the First Home Super Saver Scheme (FHSS). It’s a way for them to get tax advantages and build up their down-payment that much faster.

And of course, make sure your super is working for you. Check to make sure you’re in the right investment mix for your age and that your fund has a reliable performance record. While past performance isn’t a reliable indicator of future performance, there are funds with better track records than others. 

It’s also important to consider fees. Sometimes fees can be worth it if the returns justify it, but you still want to make sure your investments aren’t being eaten up by unnecessarily high fees.   Consider reaching out to a financial adviser if you need more guidance. 

Small moves like this can go a long way in making sure both you and your family are set for the future.

To learn more about a wide variety of superannuation topics like how much you should have in your super for a comfortable retirement and how to maximise your contributions, check out our superannuation guides hub.